1.7. Ideal Marketing System

The ideal marketing system is one that maximizes the long run welfare of society. To do this, it must be physically efficient, otherwise the same output could be produced with fewer resources, and it must be electively efficient, otherwise a change in allocation could increase the total welfare and where income distribution is not a consideration.

For maximum physical efficiency, such basic physical functions as transportation, storage, and processing should be carried on in such a way so as to achieve the highest output per unit of cost incurred on them. Similarly an ideal marketing system must allocate agricultural products

in time, space and form to intermediaries and consumers in such proportions and at such prices as to ensure that no other allocation would make consumers better off. To achieve this condition, prices throughout the marketing system must be efficient and must at the same time be equal to the marginal costs of production and marginal consumer utility.

The following characteristics should exist in a good marketing system.

♤ There should not be any government interference in free and market transactions. The method of intervention include, restrictions on food grain movements, restrictions on the quantity to be processed, or on the construction of processing plant, price supports, rationing, price ceiling, entry of persons in the trade, etc. When these conditions are violated, the inefficiency in the market system creeps in and commodities pass into the black market. They are not then easily available at the fair prices.

♤ The marketing system should operate on the basis of the independent, but systematic and orderly, decisions of the millions of the individual consumer and producers whose lives are affected by it.

♤ The marketing system should be capable of developing into an intricate and far-flung marketing system in view of the rapid development of the urban industrial economy.

♤ The marketing system should bring demand and supply together and should establish equilibrium between the two.

♤ The marketing system should be able to generate employment by ensuring the development of processing industries and convincing the people to consume more processed foods, consistent with their tastes, habits and income levels.